The Toughest Time in an Investor’s Life

And your time is now. Today’s low. The market is falling every day. You open your portfolio and look at it. In the evening, it’s a little lower, and the next morning it’s already low. It’s the toughest time in an investor’s life. But this is the time that determines whether you’re going to become an investor or leave the market forever. This is the make-or-break time. And it has nothing to do with excel. If you had been investing every month 20 years ago, how much money would you have saved? It’s the emotional side that makes or breaks. So, today I’ll give you my three-step process that I follow.  Due to which

Today, I’m invested in the stock market. I don’t know if the market is going up and it can keep going up. I don’t know how economic cycles work in Pakistan, and I don’t know that this isn’t a good time for Pakistan. And I’ve learned these three things through a lot of hardship.

Anup Kumar, co-founder and CEO of Westcar Advisory, an SCCP-licensed security future advisory. So let’s start. So, the number one thing that stops me from selling is.

Step One: Ask Yourself “What’s Next?”

I ask myself, “What’s next? Come on this journey with me. Come on this journey with me. What else is going to happen?” I’ll do one thing: I’ll sell everything I own. Then what will happen? I mean, I’ll have money in the bank. Just because money in the bank has nothing to do with it going down.

Okay. Money in the bank.

Then what? Farqan, I mean, that daily fear of losing money won’t happen to me, my market is going down every day.

Okay, Farqan.

Then what, Farqan, tell me? During this entire process, did you even once think about whether you picked the wrong asset class? Whether you picked the wrong stocks that are going down? No, right? That means, what your mind is saying, Furqan, has nothing to do with fundamentals. It has only to do with your fear. And what is fear? It’s an emotion. And to this day, Furqan, this is my mind talking to itself. To this day, Furqan, have you ever made a decision that you’re happy with, that’s emotional? I haven’t. Let me give you an example.

The Lucky Cement Example (2011–2012)

 In 2011 and 2012, 65% of my portfolio was one stock. Like it, sir.

What should I have known about that company at that time? What are its operations?

But back then, it was a very simple operation. There weren’t so many subsidiaries. It was just one company. They had a couple of operations. And I thought, my friend Furkan, if I ever wanted to start a business in my life, or if I wanted to think like those owners, I would be the owner of Lucky Cement. They have only one relationship. It doesn’t matter which operation we’re in. We just want to see if our money gets a 20% or 35% return on investment.  And I was understanding this very clearly at that time. But the market did not support me. The market went up and then came down. And then I saw that this is turning into a profit, a thing worth $0.36 became worth $0.43, 20% I have a gun, just sell it. Many have sold it. Or may have sold it due to their emotions.

Nothing changed. There was no change in finances in that correction. Business operations also did not change in that correction. Actually nothing happened in that correction. Now’s correction in this market, that thing is not going to go away after I sell it. Just think that if I had that today because if I had thought this then my wealth would have been more than what it is today. And that is my regret.  That is, emotional decisions are the thing that stops you from being invested. Nothing to do with numbers, nothing to do with the company.

And emotional decision-making means you make mistakes. And emotions are coming because the stock market is going down every day and we don’t know what the future holds. So, my question is, what then? That reminds me of what happened to Furkan in 2011-12. That reminds me that Furkan’s emotional decision-making has not benefited anyone till date. And because this decision is based on emotion. Stop it. But when I combine it with my other elements, this becomes very potent. Very important. And that is, I learned in my life that extra safety is actually a risk because we forget. And I learned this from my father’s life. 30 years ago, my father had about $5044 and my uncle had $3603. 

Due to this reason both the brothers were looking for a house. Now our entire family has lived in flats. So my father saw a very simple solution. A flat was available for $3603, he had a flat for $5044, $3603. He said to me, My uncle on the other hand, said friend, why not Bangalore? Our entire life we have been living in flats like this, let’s choose two Bangalores this time because in the future the family will grow, all the natural human decision instinct, right? The family will grow, I will have floors to build, I will be restricted per flat, but he had only $3603. 

Step Two: Extra Safety Is Actually a Risk

He took the risk, borrowed $2162 and he went to Bangalore.  Today my abba’s flat is worth $36035, my uncle’s flat in Bangalore is worth $216213, but that is not the point. $5765 became $216213, who earned more money, who earned less, no, the house was not bought for money. The problem was extra safe. I have made a safe and known decision here. Saved $1441, bought a flat worth $3603. But its cost will be understood after 10 years. Today our entire extended family meets at that uncle’s house every Eid.  All the brothers, their children, that is, our generation and our children, if they can gather in one place within Karachi, then that is their Bangalore.

My uncle took a calculated risk. My dad played safe. Now this has nothing to do with whether you should buy a flat or Bangalore, whether you should save some money or take out a loan and buy a house, it has nothing to do with it. This taught me one thing: the cost of being extra safe. When panic strikes, trying to be extra safe, and the cost of that at that time,

is not noticeable, because the cost is not crores versus six crores. The cost is that now he offers a house or… Did I do the same with the stock market?

We became extra safe, and after becoming extra safe, we made a decision we shouldn’t have made. And I know the cost of being extra safe.

Step Three: Know Your Portfolio Inside and Out

But both of these things are useless if this third step is not in place, which is, “I know my portfolio inside and out.” I’ll explain this to you by giving you an example, but if this last third step is not in place, then being extra safe means you will actually incur losses. If you are not panicking, then you are foolishly invested.

Know the things that you own.

You’re not stock picking right now, let me tell you about investing through mutual funds.

I understand. And the things that you own. Take an example. Yeah, you know. Advisory, and community. once a month, on one stock in-depth. Everything that I need to know about that company, I know. I was making a video on a capital stock, and it was a very, very simple stock. Like power tariff, look, power tariff makes a profit, profit comes. The power tariff in Pakistan is coming down, so it will go up. That was all it. But it didn’t feel right. My red blood cell, the understanding of that stock was there. I kept on researching. Nothing was found. The wall, it felt like I was hitting my head, but what came from inside. I understand this stock inside out. That is why I.

The Chemical Company / Oligopoly Insight

I had to look at these companies from a global perspective. And I noticed something strange. These chemical companies around the world become oligopolies. They set up plants in every country 15, 20, or 30 years ago; there were many. Three of those plants, after a few years, become 70% of a country’s capacity, meeting 70% of the country’s demand, while the rest remain small. And this is related to economies of scale. When a company continues to reinvest in its business, it needs containers and trucks to transport its chemicals from one place to another, they go to the top. This happened in India, Bangladesh, and European countries.

This means that a small element of this business model is power tariffs.  Over a 15-year horizon, or even a 10-year horizon, the only consideration is whether or not this company will be able to become one of the two or three companies. Once it is, 100% cash out to the shareholders of 20 companies. Meaning, it’s a matter of time whether this company will make a profit. Now, why I’m not mentioning the name of that stock is because you already know it.

I will never tell you what to buy and what to sell. I will just explain to you how much to go in if you are stock picking.

But when you go in that much, then you will realize that what we are holding is right or not. Now.

It doesn’t matter whether this thing was worth $0.36 and has become worth $0.25. What matters is whether this company can grow five times, three times in the next 10 years or not.

Now this is me. I’m buying stocks in my portfolio.

This is very risky. But buying 20, 25 stocks just because I have to diversify it doesn’t make sense to.

I have a good understanding of 10, 12, 15 stocks and I play within them, whether it is advisory or my personal portfolio. What I want to explain to you.

Who Is an Investor?

Okay. Who is an investor? An investor is someone who invests money they don’t need in the stock market. They don’t make decisions out of panic, or emotions; their mind controls their decisions. What other model do I use for them? They don’t try to be extra safe. If the market falls a little, they should be extra safe. Despite knowing that their third stock is covered, which is what they own, they understand if they’re a stock picker. But if they’re not a stock picker, but a mutual fund investor or an ETF investor, they only think about the asset class they own—stocks.

Whether they own stocks through mutual funds or ETFs—those are businesses. These aren’t stocks. These are businesses. And what is the real business of businesses? Making money. Making money even in inflation.  When interest rates are high, you need to survive, and when they fall, you need to reimburse them all, or you can take whatever money you’ve lost and earn it back. This is their business model. Stocks are only listed, so they give me the opportunity to buy more.

That’s it. So this is my thought process.

The Three Questions to Write Down

Whenever you feel like selling, write it down in a book. Will this separate emotions from practical decision-making?

Number one. Am I trying to be extra safe? Not for emotional reasons, right? Probably, you would want to stay invested, just like I try to stay invested. And number three. Invested, in what? So, why understand it? Have the shocks inside my red blood cells subsided or not?  If I’m stock picking, I’m not, I’m looking at mutual funds, ETFs, or advice. They’re all about getting your red blood cells into stocks, and you just have to think, why did I buy them? Why am I in this asset class, and am I just investing money I don’t need? It’s helped me a lot during the last two major recessions.